In the first article of this series we looked at the organization of the hospital system which is stretched to the limit due to an aging population and an extremely well organized democratic healthcare system that focuses heavily on elderly care. In this second part, the medical devices market is explained and the impact of continued pressure of expenditure on healthcare policies.

The medical device market

The medical devices market in Japan is the second largest market worldwide, after the medical devices market in the U.S. The U.S. and Germany are the only countries to import more medical equipment.

Medical spending in Japan has continued to rise in line with the ageing population, and high expenditure is due in a large extent to the use of increasingly sophisticated and expensive equipment and technology, such as MRI, CT and endoscopic keyhole surgery.

Japan is the eighth highest exporter of medical devices in the world. Increasingly, domestic companies are tending to focus on developing their markets abroad, particularly in other parts of Asia, Eastern Europe and the Middle East. The leading local industry players have begun to place even more emphasis on expanding their marketing and sales presence in these emerging markets.

Low scores are given to Japan for its regulatory systems and market attractiveness, which are the causes of the device lag. On the other hand, high scores are given to Japan’s medical technology and intellectual property protection environment.

The government in Japan has taken initiatives to reduce device lag and accelerate the approval process, which provides an opportunity to foreign vendors to tap the market in Japan. The strong IP protection by the government in Japan for innovative products has created an opportunity for the launch of novel products in the country.

Healthcare policies and reforms

With continued upward pressure on expenditure, in part due to rapid population ageing in Japan, reforms are needed to limit spending increases through greater efficiency, whilst improving quality.

To lower the medical fees and increase the efficiency of healthcare spending, the Japanese government has actively promoted the Separation of Drug Prescribing and Dispensing（SPD）in Japan, since the system was inaugurated in 1974. The rate of separation of medical practice and drug dispensing reached 67.0% in 2013.

The policies are also directed at:

Shifting long-term care to outside of hospitals

Reforming the pricing mechanism away from pay-for visit

Introducing a gate-keeping system, e.g. a general practitioner

Increasing the use of generic drugs

Encouraging healthy ageing

Promoting restructuring in the hospital sector

Implementing electronic billing

Consolidating insurers to reduce administrative costs.

Quality should be improved by increasing the availability of effective new drugs and medical devices.

The generic market share in Japan accounted for 25.3% in volume of the total pharmaceutical market share in the first quarter of 2012, and was far lower than that of other countries, such as the U.S. (80% in 2014 of all prescribed medication) and the UK (75 % in 2013 of all prescribed medication).

The profits granted to doctors from prescribing and selling pharmaceutical drugs made the level of drug consumption in Japan the highest in the OECD area in 1996. However, since then, the government has taken measures to reduce expenditures on drugs, notably by bringing drug prices closer to wholesale prices, encouraging the separation of prescribing and dispensing, and imposing penalties on over-prescription. Reimbursement was cut by 10% when 7 or more drugs are prescribed. This has helped to halve physicians’ total number of drug prescriptions. Increasing the market share of generics and reducing their price relative to branded drugs, would cut Japan’s drug expenditure and thereby reduce total health spending.

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Zhen is in charge of Asian Operations at TforG, with more than 6 years of experience in project management and business consulting for local and international companies. She works in a continuous basis with an extensive network of Key Opinion Leaders and Health Policy makers in Asian markets.
She graduated at the University of Antwerp and has a Master Degree in Finance.
Tel: +32 3 201 64 24
Mobile: +32 485 89 98 84
Email: z.nie@tforg.com

Zhen Nie

Zhen is in charge of Asian Operations at TforG, with more than 6 years of experience in project management and business consulting for local and international companies. She works in a continuous basis with an extensive network of Key Opinion Leaders and Health Policy makers in Asian markets.
She graduated at the University of Antwerp and has a Master Degree in Finance.
Tel: +32 3 201 64 24
Mobile: +32 485 89 98 84
Email: z.nie@tforg.com